Tuesday, December 28, 2010

HST fears fuelled record housing sales

Fear of a phantom 13%-tax bite on resale homes fuelled record sales in the spring but that’s unlikely to be the case in the coming year, the Toronto Real Estate Board says,
“It was booming. It was crazy with tons of multiple offer situations,” said TREB president Bill Johnston of the market in the first quarter of 2010.
“Once they get the clear message, they tend to overlook these taxation issues and get on with their lives.”
Johnston said many prospective home buyers misunderstood how the Harmonized Sales Tax (HST) would be applied once it kicked in last July, and believed it would add “a big whack” to the purchase price of any home they bought.
In fact, the HST doesn’t apply to resale homes and is only levied on new homes, although buyers can get some of the tax rebated on purchases of $500,000 or less.
TREB reported first quarter home sales in the GTA set a record in March this year with total sales of 22,418. New listings that month were 42% higher than the previous march, the board said.
And while that fell off after the HST came in on July 1, Johnston said sales still held up credibly for the rest of the year and he’s optimistic about 2011.
“I think we’ll see a stable market, frankly,” he said. “The economic news, as you know, has been relatively positive for Canada and the U.S. seems to be showing more signs of life than it did this time last year.”
Ending the City of Toronto’s Municipal Land Transfer Tax — as new Mayor Rob Ford has promised to do — would be a big boost, Johnston said.
But he said he doesn’t expect Ford to move on that promise until 2012. The tax brings in almost $200 million a year to the city.
The Canadian Chamber of Commerce also believes home buyers in Ontario and British Columbia pushed forward purchases in the first half of the year because the HST was looming, president Perrin Beatty said in a news release Monday.
The cooler housing sector and cautious consumers will mean moderate economic growth next year, Beatty said.

“The Canadian economy is chugging along but not at full steam,” Beatty added.